Master Your Card

I came across a website today that listed five good reasons to rack up credit card debt. You can read the original post here. But, I’m in a bit of a crusty mood today and as I think the reasons the blogger listed were actually kind of goofy, I’ll go over them here.

Essentially, the five reasons amount to this:

• Build a business
• You’re going to die soon
• Paying for huge medical expenses
• Credit Card Arbitrage
• Avoid going to Iraq

Build a Business

In all fairness, I’m not completely opposed to this one. I think as a general rule, all other opportunities should be exhausted first. But, if you can’t get the business credit you need to get moving, sometimes a personal credit card is all you can work with. I would strongly advise against it if you have a weak business plan or a very high risk business – such as a restaurant. Very high risk businesses have a hard time getting a loan for a reason; they fail within the first two years. But, all too often I see people with credit card debt because of a business venture that didn’t pan out. They didn’t consider all of the work and sacrifice it would take to build the business. But, if you’re totally committed and know that you can make the business work, then credit cards can be a great resource. Just have an action plan to repay them quickly.

You’re Going to Die Soon

Sure, let’s let our friends and relatives – already grieving because we’re gone – also deal with the creditors hounding them day in and day out to repay our debt. Who cares? We’re dead!

What a horrible suggestion and certainly not a good reason to rack up debt. It’s selfish and leaves your friends and family in a terrible predicament. If you’re in debt and there’s not enough money in the estate to cover it, then it’s supposed to be absolved but creditors try sneaky tactics to collect. And they will bother your friends and family until either someone pays or someone calls the OCC on them. Even if there’s money in the estate to pay for it, that money could have been better spent paying for your funeral and then divvied up amongst the family.

Paying for Huge Medical Expenses

Why would you put something like this on a credit card? Most hospitals will work with you on a payment plan that doesn’t cost you interest. There’s no sense in putting that on a credit card. It doesn’t make the debt go away. You’ve simply transferred it to a different creditor; one that’s going to charge you and arm and a leg to house it with them. Definitely not a good reason to rack up credit card debt.

Credit Card Arbitrage

Taking out debt to earn a little income is silly. Number one, if you don’t pay back the money prior to the expiration of the low rate you then have this huge loan that’s charging interest at a higher rate than you’re earning. Number two, the outstanding debt looks bad on your credit because of the debt to income ratio. Your score is going to drop and you become less creditworthy to other borrowers. And the kicker to this is if that low-rate card participates in the Universal clause, they could jack your rate because you’re more risky to others. None of which really helps you earn more money.

Avoid Going to Iraq

This one the blogger listed because of a personal experience with someone he knew doing this. The logic is that a person with high amounts of debt cannot be sent overseas because they are more likely to commit treason for money.

Ok, first of all this is career suicide. If you can’t get security clearance, there’s not really much you can do in the military. If you have no desire to continue moving up the ranks, then this isn’t a big deal for you. However, I think this is somewhat – dare I say – cowardly of a person to do. You joined the military to perform a service, and while I don’t like our troops being in Iraq and would prefer them all home, going about it by jacking up credit card debt isn’t the way to do it, in my opinion.

Secondly, we also run into the issue of ruining your credit. The debt to income ratio is shot when you run up credit card debt. Until that debt is significantly reduced, you’ll have a hard time getting a decent loan for anything, including a car or a house. Any way you look at it, this is definitely a goofy reason to run up credit card debt and I don’t recommend it.

All in all, I’m not a fan of these reasons for credit card debt and would personally recommend not using credit cards for any of these situations – with limited exceptions on running a business.

What do you think? Do you find any of these reasons good reasons to run up credit card debt? Why or why not?